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Michelle Singletary, "Big Mama used to say it's not how much money you make that matters, but how you make do with what you have"

Questions & Answers

Love & Money

Question:

I've read in past columns that you and your husband tithe. I wasn't raised in that tradition, but my husband was, so it's hard to wrap my mind around the amount you tithe: the gross or the net of your paycheck? My husband received a $5,000 bonus and gave $500 to our church, even though (once taxes came out), we only wound up getting about 1/2 of the $5,000. So to me, he gave more than 10% because the $5,000 was theoretical money while the amount we actually received was the real amount. How do you see this?

Answer:

Oh my dear, are you really prepared for my response?

The way I was taught in my church you give on your gross. So your husband was right about the $500. As one pastor said, "Do you want a net blessing or a gross blessing?"

Now I say that in jest because you don't give with the expectation that you will get back. But I understand your hesitation. It really does take a great act of faith to tithe and especially on the gross. But scripture says you tithe on your increase. Not after you save, pay taxes, pay the bills, etc.

I will say this; since I became a tither I have learned that it makes you handle your money better. Talk this over with your husband, get his insight and I do hope and pray you both come to be comfortable with this. Perhaps one day you too can wrap your mind around this type of charitable giving. And keep in mind if you belong to a church or religious organization that is using tithes well, you are helping a great many people.

Question:

I'm female, in my early 30's, work for a non-profit organization, and make a low salary for this area. I keep my expenses low and get by. When I date, I feel uncomfortable if my date pays for everything. I feel like I can't hold my own if we want to do anything at all that involves spending money. Help! Do I need to increase my income or increase feeling comfortable if other people (the guys I date) subsidize most of my entertainment costs?

Answer:

Maybe both. Look for ways to increase your income because you may have to save more for emergencies, retirement, home, etc. But also you need to feel comfortable being able to afford what you can afford. That means finding things to do with your date that doesn't cost a lot. Does it mean you can't do some things? Yup! That's life.

And trust me, the day you find the right person who appreciates the fact that you’re living within your means, keep him.

Question:

I am married to a wonderful husband who has significant financial obligations to his family in his home country--paying for a sibling's college education, which I totally support, and for basic household expenses for his parents, who are retired with no income and have some health issues. I am currently paying 100% of our household finances (mortgage, utilities, food), while my husband sends a significant portion of his income to his family. The problem is that my husband continually asks for "loans" of additional money for his or his family's expenses because he hasn't budgeted or planned exactly what he can afford on his salary. He occasionally bounces checks from his checking account or our joint account, regularly incurs over limit fees on his credit cards and is adding to our debt, to my continual frustration (which I have voiced repeatedly)…He never wants to talk about money matters because for cultural reasons, he feels humiliated that he cannot provide for me. I know I need to force him to make a budget, so he can see what his expenses add up to. Any suggestions, so we don't end up in divorce court?

Answer:

Honestly, you guys might need to see a counselor. There's a lot going on, namely you need ground rules for your marriage and your money.

For now, I would try to get him to sit down and you both agree on a set amount -- given all the obligations -- he can send home every month. And that's it. The family will have to find other ways to finance their life.

The problem is you didn't negotiate this before you married. So it's anything goes now. But I do think you can resolve this without a divorce but it will take a lot of work.

Also, I would suggest stop the ‘his and mine’ thing. Pool all the money. Then allocate the funds for your household expenses first -- mortgage, car, food, insurance, savings, retirement investing (for both of you), etc. Then BUDGET for the family money. Make all of this a joint venture. Perhaps then he will see there isn't enough for him to play hero to everyone while making his wife (his No. 1 priority) crazy with worry.

Question:

In January, I will receive a nice raise. We could use my raise to either beef up our emergency fund, or start paying down our piggyback mortgage. We already save 10% for retirement and have no non-mortgage debt. We also save a modest amount for our children's college fund.

We bought a house at the height of the housing boom using 100% financing. Our interest only 5 year ARM will reset in 2011. Should we really start tackling mortgage principal or make sure we have 6 months of living expenses? (We have 2 months left). Thanks!

Answer:

Here's the order in which I would use the raise:

  • First beef up the emergency fund. Once that's done
  • Tackle the second mortgage
  • Then use the raise to beef up the college fund

Question:

My hubby wants to buy a Sunday-go-to-church car. We have 2 perfectly running paid-for cars now. We have enough to put about $25k down on a luxury car and carry a $500/mo car payment for however long. Please tell him why we should go used and not new!

Answer:

Tell you hubby for me he's a knucklehead!

This is especially so since you would put down $25,000 and still carry a note. Are you kidding me? You are kidding me, right?

He wants to pay for a car just to drive to church when you have TWO paid for cars. Now if you had said we are flushed with cash, got all the money we need for retirement, give to charity, no mortgage, no credit card debt, and can pay ALL cash for the car, I would have said go for it; you got it like that. But, you don't have it like that. You don't NEED to go new or used. Why don't you use that money to bless a family that doesn't have a car?

Question:

My husband and I really want to save for a house and possibly buy next year but how do we start? I'm trying hard to save money but we just keep putting what we make toward bills/debt. We owe about $10,000 in credit card debt, car loan and student loan. How would you go about saving money for a down payment? CD/Money market? Right now we have about $2,000 just sitting in the bank (savings).

We're in our late 20's and haven't even started a 401 or anything for retirement. I actually feel helpless over the situation and it's overwhelming that I just don't know where to start.

Answer:

Here's what I recommend first to people in your situation.

Breathe.

Seriously, after you read the answer to your question. Take a deep breath because it's going to be okay.

Next, you will be able to calm down when you get a plan. Yes, that means a budget. You'll find a template for one on my page at the Post Web site.

For example, you may be rushing into getting a home too soon. I mean you're just in your 20s. No rush. It's better to be free of that debt bondage first. And really you don't have a lot if that $10,000 is spread across credit cards, car and student loan. Aim to pay off the debt -- all of it.

I wouldn't even me mad at you for delaying contributing to your retirement fund at work if you had a plan. Get this monkey debt off your back first.

You also need to build up your emergency fund (at the very least 3 months of living expenses). The 2k is a nice cash cushion for what I call a life happens fund because well life happens. You need that money for car repairs, etc.

Then start contributing to your retirement fund. Then start saving for the home. Go talk to some real estate agents and figure out where you want to live and how much house you can afford. That will give you a starting point on how much you need to save.

Finally, after all this you are ready to save for a house. If you plan on buying in less than five years, park the money in a high yielding savings account or money market.

Hope this helps and keep coming back. I'm here for you.

Question:

We are currently living well beneath our means, though we certainly have everything we need and much of what we want. When our household income went up we chose to stay renting our 1BR rather than "move up." We are saving $1,500 to $3,000 per month, on top of each doing the maximum contribution to our Roth IRAs and maximizing my employer's match for my pension fund.

We have no debt whatsoever (no student loans, car payment or mortgage, and we always pay off our credit card every month), and on top of that have fairly significant assets thanks to gifts and inheritance from my side of the family. To give you an idea, if we were to hypothetically sell all the stocks, we could afford to pay cash for a 2BR condo in the city.

I believe that we are in an INCREDIBLY fortunate position for a young couple. However, my husband is forever thinking about our financial situation -- strategizing how we can save more, budget better and complaining about how we waste too much money on things (Christmas gifts, inevitable car repairs, my own shopping which, is by no standard extravagant, etc). He invests a great deal of his spare time in analyzing these numbers and talking to me about it.

I appreciate his desire to save up money to ensure a secure future for us, but sometimes I worry that he is sacrificing his enjoyment for life (i.e., shorter vacations than necessary) at the expense of constantly thinking about money.

I almost feel stupid submitting this question when there are so many people out there with real financial challenges we are so fortunate not to have, but am I out of line for thinking he expends too much energy on money matters?

Answer:

Girl, don't feel stupid. I'm your husband. I know what he feels -- fear.

And you are right to be a little concerned. My husband is forever getting on me to stop worrying about money. For me it's not about the ability to buy stuff. When come from a low-income or poor background often you worry about financial security.

What helped me was to do our net worth statement. You can download a template from the Post biz section.

When I saw how much we were worth and how little debt we had compared to what we were saving and owned, I did feel better. Try that.

And just keep talking to him. Ask him what he fears? Tell him that you both work hard you if you are saving and investing wisely, it won't kill him to take a one or two-week vacation. Tell him I do. Every year. Two weeks at a 5 star resort (with kids in tow). It's a journey so be patient with him.

Part two was a question/response from the husband.

Question:

Do you think [your husband] would be willing to come over to my place and look at our finances? We've got lots of student loan debt, a timeshare we can't afford, nearly $20,000 in credit card debt, a freeloading relative, a car I want to sell, and more. I'm drowning here. The ends used to meet. Now, they are a long distance phone call away.

Answer:

That's funny in a sad way.

So first let's breathe. Seriously, right now take a deep breath. Now let's get a plan

  • First go to the Washington Post business section (personal finance) and look for the budget worksheet I've created. Do the budget and I mean it. Sit down with your spouse, gather up all the bills, checkbooks, etc. and budget so that you aren't overspending every month. This might mean doing some heaving cutting, which brings me to the next step
  • Kick the relative to the curb or ask for rent. You used the word freeloading so I'm assuming this person can pay something, anything. Do it. Now. Today. No one takes advantage of you unless you LET HIM OR HER
  • Today, both you and your spouse go to the benefits office and begin to have some money taken out automatically to save for your emergency fund. I don't care if it's just $20. Do it.
  • Start doing the research to sell the car. Go online to edmunds.com or kbb.com to see what it's worth. If you don't want the hassle of selling it privately try Carmax.
  • If you bought the timeshare from a large hotel chain (which I hope you did) call them up and see if they have a resale program. Take whatever you can get to unload it. It may mean you still have a loan balance but that's okay.
  • Pull all the credit cards out of your wallets and seal them up. Stop using them and then devise a plan to pay them off. Start with the card with the lowest balance. Pay just the minimum on the rest. When you pay off the card with the lowest balance, take that money and apply it to the next card with the lowest balance, and so on
  • The student loan debt may have to wait until you get control of the other debts

You see when you have a plan things don't feel as out of control.

From washingtonpost.com: Here is Michelle's Net Worth Statement (pdf) and the Budget Worksheet (pdf) just in case.

Unless otherwise noted the questions were answered by me in recent online discussions on www.washingtonpost.com.